Glaxo, Smithkline To Stay Separate

LONDON — Glaxo Wellcome PLC and SmithKline Beecham PLC abandoned merger talks, saying they couldn't agree on terms for a marriage that would have formed the world's largest drug company.

SmithKline Beecham said the talks were derailed Friday, when Glaxo said it couldn't go ahead with previously agreed upon plans for splitting up the management of the new company.

The transaction would have been the biggest merger ever, valued at more than $70 billion. The two British rivals announced the talks Jan. 30 after SmithKline broke off discussions with American Home Products Corp.

"It's a surprise," said Edmund Debler, an analyst at Mehta Partners. "The way that it was announced, with the distribution of the split and the discussions

of the management team, it seemed like the deal was going to go through without that much trouble."

SmithKline said differences emerged in the discussions, on "the approach to the possible merger, management philosophy and corporate culture." Glaxo's conduct of the talks "strained relations" between the companies, SmithKline said.

Investors had hailed the merger as likely to spur consolidation in a competitive industry that includes Merck & Co., Novartis AG and Eli Lilly & Co. Drugmakers are joining forces to save money and foster development of new drugs.

The combination of Glaxo and SmithKline would have created a company with market capitalization of more than $160 billion and annual sales of more than $27 billion.

And it would have combined Glaxo's dominant market share in drugs for ulcers, asthma and migraine with SmithKline's range of antibiotics, vaccines and consumer health-care products, including Tums and Aquafresh.

Under the tentative terms announced in January, SmithKline Chief Executive Jan Leschly was to head the merged company.